tv Your Bottom Line CNN April 2, 2011 9:30am-10:00am EDT
in florida. it left 12 people dead, 6 people were also killed and another 46 injured this morning in a similar protest in kandahar province. i'm going to hand this over to "your bottom line." i'll be back at the top of the hour with more of your news. is the american dream of home ownership gone forever? a bold new call this week that the worst is over. welcome to "your bottom line." i'm christine romans. at the housing peak in june 2007, the median home price of an existing home was more than $230,000. today a third of that value is gone. the median existing home price in february $157,000. here with me now, forget stocks,
don't bet on gold, after four years of plunging home prices, the most attractive asset is housing. state your case, sir. >> well, first of all, it's always good to buy when down in value by 40%, including inflation as opposed to tripled. you don't hear that very much. typically you hear, you know, buy gold, buy stocks. these are assets that have been bid way up in price recently, bonds the same thing. housing has been going down for virtually five years. we finally gotten back, and it should have gone down. it needed to go down. baufz housing is drive i becaus by rents. and when renting is much cheaper than owning, which was the case for a very long time, people are going to rent. and what we've seen is for five or six years, all household formations went into rentals. we've become a rental society. and now finally, and it just really the turning point came early this year, it's now much more cheaper to own than to
rent, especially in the markets that have been the hardest hit. >> i want to show you the results of a recent survey about home ownership in particular. the reason people gave for home ownership. the number one reason, having a place to raise a family. that is why i bought a house. nothing to do with the cycle of home prices in this country. of building equity rather than paying rent, making a good long-term investment, acquiring an asset. you start to see more of the financial and community-related. only 2% for tax deduction. this is their field guide for the benefits of home ownership. this is in magazines from martha stewart living to popular mechanics, they have a pull-out field guide saying home ownership has proven to reduce crime. 10% more likely to attend church, less likely to be a teenage mother, making a strong push for home ownership. a lot of people are thinking about a home right now with none of these things in mind. >> and good for them. because they shouldn't be --
>> thinking about how much money they have in their paycheck. >> on the one hand, this is ridiculous. all of the stats are probably accurate, and they're exactly backwards. the people in a position, stable enough to own a house have all of these good attributes, it's not the other way around. the house didn't make them better people. more importantly, i know there's an national obsession with owning a house that has survived this horrible crash. people think, as soon as i get out of college, i've got to buy that house. i agree with shawn 100% that right now houses are -- it's a good time to buy. and you want the assets that have come down. but you don't buy a house if you're a young person who might get a job offer in a state across the country. right now people can't move to where the jobs are because they'd have to take a big check to the closing. but if you're renting, hey, great, i got a great offer, i'm going to go take it. >> the key is understanding what is the key to making money off the house? and the big part is staying put. not like an asset like gold
where you want to buy it, sell it, and it goes up within a year, you want to stay put. on the topic of the survey in terms of the voting and all of these stats are ridiculous. they say nothing about age, the older you are, the more likely you are to own. that sort of thing. it's not about that backwards. it's about really are you in a position to buy? >> how do you know that? >> i agree that it is. if you are in a position to buy, now is a good time to buy, especially if we see fannie and freddie go away. it's an absolute bargain. but you have to be in a position to buy, you have to have great credit. and i get yelled at and e-mails about this from people all the time who say to me, especially mortgage lenders who say how could you dare say that? the guy who e-mails me with a credit score at 540 and gets a mortgage at 8%, that's not sustainable. if you want the best rates, clean up your credit, have lots of cash savings, and be ready to stay there for a long time. in the past we used to say three years, now we say at least five
because this market is going to slowly move up, slowly. >> definitely at least five. >> slowly. this is going to be slow. >> do you have 10% to put down too? that's very clear. and in some places you need more than 10%. in some places where you're getting a bigger loan. this is going to be one of the reasons why the house as an asset is not like gold or a stock. >> not at all. and housing over time, if you buy it, the average period appreciates about 3% a year. a little bit more than inflation, maybe one point more. and that's good. that gives you a nice nest egg return coupled with the savings by paying down the mortgage you're accumulating, which is a very healthy thing, but you don't want to speculate in houses the way people -- mom and pop, the average person was doing in the old days unless you happen to be buying foreclosures. >> and i think 32% of home sales are people using cash to buy homes. and in some cases, there are middle class families priced out, but in a lot of cases,
investors who have cash. take a look at the best reasons not to own a home. 21% say the monthly mortgage payments are too high. 21% are worried their house will lose value if real estate prices drop. 19% say they're losing the flexibility to move if they find a new job. and, wow, almost 1 in 10 say it's too expensive to make the down payment. spending too much time and money on upkeep. that's interesting. we had a big build-up of all of these great apartments on cheap credit. there's great apartments out there. >> and a lot of them are sitting empty right now. and i think this is maybe one i might be a tad less optimistic than shawn. this overhang of foreclosures. one estimate nearly 8 million houses, the official nar estimate is 8 1/2 months of inventory waiting to be sold. but it could be more like three times that. i think this is going to weigh on housing prices for a long time. but again, it really shouldn't make a difference.
think of it as a place you want to raise your family, that's why you bought a house and hang on to it for ten years. and ten years from now, people who bought now will look like the smart money even if we do overshoot. >> thank you so much. have a great weekend, you guys. if your mortgage payment doesn't make you cry, maybe your boss does. the age old question, is it ever okay to cry at the office? ♪ what do you see yourself doing after you do retire? client comes in and they have a box. and inside that box is their financial life. people wake up and realize. "i better start doing something." we open up that box. we organize it. and we make decisions. we really are here to help you. they look back and think "wow. i never thought i could do this." but we've actually done it. [ male announcer ] visit ameriprise.com and put a confident retirement more within reach.
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attention office workers. you probably spend more time at the office than doing just about anything else except sleeping. it's the focus of your energy, emotions, and all too often your frustration. think about this. have you ever cried at the office? ann kramer is the author of "it's always personal." >> i'm laughing, i'm not crying. >> he says well, i cry at the movies, but not at the office. >> you blew my cover, christine. come on. the ladies love it. >> the ladies love it when you cry in the movies. >> that's right. >> is it ever okay to cry at
work? >> yes, it is. one of the shocking things we found out. i did a national survey, getting a snapshot of emotion in the workplace, and 88% of all americans want more emotion in the workplace than they see each day. >> it's not a sign of weakness? >> no, we developed the sense it was a sign of weakness when women started to go to work in the '60s. "man up" was the sort of directive. today it actually can be a sign of empathy, compassion, and going to our center of strength. >> do women feel differently about crying in the workplace than men feel about crying in the workplace? >> when men cried, they reported they felt refreshed, cleansed, better, the world was a new place. when women cried at work, they reported they felt ashamed and victimized, it was a very stark difference. >> and men are easier on women who cry in the workplace than women are on themselves. more women said it was not okay to cry in the workplace.
>> for then it was just like, one time unprofessional moment. for women it was a moral failure. >> it's because we're so sensitive. >> i know. >> it's so interesting too because men were more likely to say it's okay to cry, but men were less likely the to cry. >> yeah, i think it's probably women holding each other to a higher standard, i think, you know, historically, women feel the need to be managers that they are. and i think it's the statistics are bearing that up. the movie with tom hanks "a league of their own." there's no crying in baseball. i talked to a lot of entrepreneurs for a living and they love to see employees that are invested, care about their job. emotion shows that you care. and as a manager, that's what you want. you don't want to take it too far you can't get your job done, but it shows you're invested. >> taking it too far. an occasional cry is probably okay. this is where we kind of define ourselves, our frustrations after all of this time at work. how do you make sure you cry
appropriately that shows you empathetic instead of someone who can't handle it. >> don't let it build up. people cry out of frustration, out of anxiety, feeling overwhelmed, and unheard. if you feel like you're getting into one of those pressure point moments, go to your boss and say, look, i'm having some trouble here, can you help me? and avoid it. >> it's the proverbial straw that broke the camel's back. it's the 25 things that happened before that. >> that's exactly right. >> i think you want to vent, talk to your colleagues at the water cooler. a little healthy venting is a good thing. you don't want it to build up, but do it corrective and productively. you want to get to a better place, that way it doesn't build up and you have this volcano moment. >> thank you so much. thanks, you guys. to prepare for a job that won't make you cry, you need the right education. but this will make you cry. college tuition is up 400% since
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whether you're in kindergarten or chem 177, budget cuts are coming near you. some are made cuts to higher ed or raised tuition to make up for a lack of funding, 34 states have cut k-12 education. steve perry is the education contributor who is very concerned about higher ed cuts, because this is where the kid has to be prepared for the global economy, steve. >> well, the bigger issue is -- recently has been the cuts. but the bigger issue is our college and is universities are raking the students over the coals. a report of 569% increase in
tuition since 1990. there's been almost a 400% increase in tuition. what are the students getting 400% better than it was in 1990? >> that's a good question. an average of $7,000 for a public school. these state universities. sandy balm is with the college board. the advantage of a public school education is not paying for the private schools. what do they mean for tuitions for these universities? and why is it no matter what in good times and bad, college tuition just goes up? >> well, the state budget cuts are a real problem for the states themselves, for the economy, and for the students who depend on them. and it is true that for many students going to the public college or university is the most inexpensive choice, but for other students, it can actually be cheaper to go to an expensive private college where they get a lot of student aid.
so those sticker prices can be quite deceptive. it's true that college prices in general do go up faster than the prices of other goods and services. a lot of that does have to do with budget cuts. the expenditures of public colleges and universities haven't been going up so fast. it's that they've been having to make up for the lack of public funding through raising tuition. >> i've heard this before that tuition's going up, but, you know, financial aid packages are going up too. are we talking about loans? aren't kids -- aren't kids paying more money to go to school today, sandy? >> actually, the amount on average that students are paying for tuition and fees is not going up faster than other prices in the economy. and that's because the federal government has done a lot to help students pay for college. now, that might not last because there is a lot of talk about cuts in federal student aid, but the federal government, state governments, colleges and universities themselves all give a lot of grant aid. so students do borrow to go to college. and many students borrow more
than they should. they also work to help put themselves through college. and actually living costs are a big problem for many students. >> steve? >> no, the students are borrowing as much as they need because that's the only way they're going to get to stay in school. i work with a particular population of students, many of whom come from historically whom come from historically disadvantaged populations. borrow because their credit was bad from the housing situation. our children are struggling to make the basic tuition payments. they're coming home in their second year because there isn't enough. the federal government has made some grants available but it hasn't been enough to meet the rising costs of public education and private college education. there's got to be a stop at some point because we are going too fast too far. families don't make $50,000 a year, so how can they afford to pay $50,000 a year to go to college? even $27,000 a year? so many families are borrowing to the teeth. it shouldn't be cost prohibitive to participate in the middle
class bay way of college. this is not the way the american dream was set up. we look at community colleges versus state colleges in the same state. unschool can have $333 per credit. then the community college is 133. why it is two-thirds greater? because that college is not taking into consideration the very needs of the state. it's simply going up and up and up. and one of the reasons is they keep building. college presidents and their boards are spending more money than they have. as a result, they pass those costs on to the students. yes, there have been cuts, recently there have been cuts in what's happening at the state level. however, this has been going on since the '90s. so that dog don't hunt. the reason why is because the colleges are not being mindful of their students. they're putting their wishes above the specific needs of the children and families of the states. >> i want to look at some numbers. because you make an interesting argument about the aid that gets are getting.
2010 it was about 11,500. that includes more than 6,000 in grants. grants don't have to be repaid, loans do. grants don't. sandy, you say that tuition is steadily increasing but not increasing faster than the cost of other things and that financial aid is increasing. make that case again. because i feel like a lot of people -- a lot of students we talk to, a lot of parents don't feel this way. >> that's not exactly what i said. and the situation is much more complicated than this description just made it sound. people are struggling tremendously in this economy. if you lose your job and you lose your house, i mean, you have huge problems. you can't live. you can't afford any extra expenditures. and we have real people and people need a lot of help. tuition is rising rapidly, tuition at public colleges and universities is particularly rising rapidly, but the sticker price is not what most people pay. two-thirds of college students
are getting grants. you have to look closely at what different students are paying. we should simplify it, give people better information and we should protect people. because it's a great investment for most people but it doesn't turn out well for everybody. we need to make sure that the people who are whom it doesn't turn out well are protected in the long run. have a wonderful day. thanks for your insight. if money makes the world go round, why do so many smart people do such dumb things with their money? five simple step to fix your financials. funds, iras, or annuities. back then, he had something more important to do. he wasn't focused on his future but fortunately, somebody else was. at usaa we provide retirement solutions for our military, veterans and their families. from investments... to life insurance... to health care options. learn more with our free usaa retirement guide. call 877-242-usaa.
things with their money? >> lots of reason, but the first is they don't answer the question, what is money for? >> it's to buy things. >> no. well, it could be to buy things, but bigger than that. >> more than retirement and more than saving for a college education. >> it's holistic, family, home, stuff, wild cards. >> that's existential. that's not financial. >> i am deep. that's first step in getting a handle on your money. i call it laying the foundation. you answer the question what's my money for. i do workshops all the time. when people answer that question, their eyes light up and their shoulders go down. they say it's for adventure, for experiences, for family, for choices. when you have your vested interests covered, it is more likely that you're going to do the more responsible thing rather than buy the chimjimmy c. >> determine what you want. i love when people think holistically. so much of what people talk about financial planning is
retirement. that's not inspiring for most people. they want to think bigger about a villa in tuscany. if that's what it takes. >> i don't want a villa in tuscany. i want to put my kids through college and make sure there's money available at the end. am i not dreaming big enough? >> no, when it's done, you're not over. do you want the person delivering your eulogy to say, she had a fully funded retirement. so boring. you want the person to say, they contributed to the family, they had a great life and a fully funded retirement is not enough. >> so develop a plan. >> number three. they do it at work, they develop a plan but not for their money. it makes me crazy. because they have these skills. >> people can develop a plan for how they're going to lose weight, there are people that are total gym rats yet have no idea how much money they have socked away for retirement. >> unbelievable. >> they know exactly what day of
their workout routine they're on. they have to switch to weights today. >> they have the skills. >> this is the same way for money. >> same thing with exercise. you need to take action with your money. that's easier said than done. i fully admit it, but we asked the wrong question when it comes to action. we ask the question, why am i not taking action? it's a virtually useless question, yet we talk about it with at the cafeteria and with our therapist after work. we need to ask the question, what is it going to take to take action? creativity, discipline or courage. one of those things. that's where we need to focus our attention. >> one of the things i feel is that most people their financial future happens to them. it is not something that they are actively managing. you're saying it is not working at a job, but this has to be a running conversation every day, your smart financial choices. >> number five, stay engaged. it is not something you can do once. wouldn't you love if you could fill your fridge up and just